The Siri Effect: Is Apple's Latest Feature Positive or Negative for Google Stock?

The answer may surprise you -- and the pundits.

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Has the Siri (AAPL) effect been positive or negative for Google's (GOOG) stock price? The answer is far different than what many others are asserting.

Of late, there has been some irritating commentary flying around the Web -- even "name brand" sites have published information that is completely incorrect. One assertion in the air is that Siri is the Google killer since it "bypasses" Google search.

This makes me wonder if the iPhone/iOS "experts" -- and I use that term loosely -- are even doing the most basic research. Tech investors need to know that a willingness to learn about the capabilities and inner workings of a product is the only way to invest wisely. The flat fact is that on any iOS device, Google is likely the underlying search engine. Thus Siri is in fact using Google search. Apple's iOS uses other tools like Wiki and Wolfram Alpha to feed Siri, but anything that needs traditional search functionality uses the device's search engine.

So which search engine? This answer is easy. It's whatever search engine the user has set as the default embedded in his or her iPhone settings.

Most people use Google, a small percent of others use Microsoft's (MSFT) Bing. There are other choices, but they account for less than 2% of all searches, as seen by the results from Statscounter.

So what this could do for Google is in fact the opposite of what many pundits are saying, and that is create the potential for increased revenue at Google sites. Why? Because if you have a business and you want Siri to deliver the one answer it will, you had better be willing to pay dearly for the first spot in the search algorithm.

Does this means Siri isn't good for Apple? Absolutely not. Siri was the must-have addition to the iPhone, especially given the voice recognition lead that Android has already established as well as the progression of 4G (real 4G, the LTE variant). In fact, I would go so far to say that had Siri not been as compelling I would be more worried about Apple's future phone sales. It also gives the Apple community a product loyalty boost which should not be underestimated.

So does all of the above provide the real answers to Siri being a meaningful threat or not? Actually, I would say no. Mostly it's just good theater. However, I'm going to stand by my assertion that we could see many search terms increase meaningfully in price and thus help, not hurt Google's search results.

So what are the main reasons Siri isn't a huge threat?

These are exceedingly simple.

1. Google's Voice Recognition Technology. Here again is a plain fact that seems lost on many. Google was the first to really make this tech useful and popular. Moreover, the functionality is already very good. Siri has answered the challenged and done so well. If anything it's another reason to own both stocks, as they will just keep playing leap frog at the expense of the competition.

2. Android share. Simply put, the greater the Android share the less Siri matters. Android's share of the market is nearing 50% (of smartphones), and Android is this generation's version of WinTel. Android's innovation curve is faster than iOS's and given market share growth, the public seems to think it offers more compelling value. For the vast majority of Android users, Siri doesn't matter, as they have already been using advanced voice features for 18 months or longer. Moreover, they view Siri as a catch-up effort and have little to no desire to switch back to an iPhone due to Siri. In fact, it likely strengthens their loyalty to the Android platform.

3. Android's innovation curve --Ice Cream Sandwich. The Android user base is far more exited by a combination of product choice combined with the coming OS refresh (Ice Cream Sandwich), and further future Android developments than by Siri.

4. 4G proliferation means more than voice functions. I can't prove this one but I feel the continued move to "true" 4G benefits Android over iOS. Though I do think the 4S iPhone partially answered this challenge, when I think about the convergence of consumer choice, Ice Cream Sandwich and enterprise penetration of Google's Doc's/App's platform, I can't help but think this more than swamps any potential threat from Siri.

5. Are voice search/functions really the most useful? In my view, the existing search/key input interface is simpler, more expedient, more flexible and generally better than many voice commands.

Why? To use voice features, you just can't have much ambient noise around you. Also, after the novelty wears off, you realize that it takes longer to speak and/or then edit your speech terms than it does to type a few characters. Many times a voice search leads one to migrate to the textual search anyway.

From my experience, I find the voice function most useful for longer dictation -- like sending emails or longer text messages.

For quick items like dialing a contact, looking up a business or other common search type functions, I can do them all faster by typing or gesture search. And for those who haven't used gesture search, I would highly suggest it.

Bottom line, Siri is great and it will help Apple sell the new iPhone. But it's not the game changer being proclaimed, and I am sticking with my larger weighting in Google relative to Apple, and intend on increasing Google more in the coming days/weeks. Moreover, as written, I think the best way to play Apple now may be with Qualcomm (QCOM) and possibly Skyworks Solutions (SWKS).

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